Borrowers planning on using the government housing bailout need to be aware of some restrictions placed on home equity lines of credit (HELOCs).

CNN Money explains:

“Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it’s to pay for necessary upkeep on the home.”

In a nutshell, if you’re planning on using the goverment bailout:

- you must first pay off your home equity line of credit

- you cannot take out another HELOC for at least 5 years unless it’s to maintain the property

These precautions are probably a smart idea. If the government is going to bail out borrowers, the least it can do is keep recipients from making the same HELOC mistakes a second time.

 See Also:

A Home Equity Line of Credit From Congress

HELOC Foreclosure

Tags | Heloc, home equity line of credit, mortgage crisis